Sunday, October 28, 2012

Do we Need More Infrastructure Spending?

I was having a debate with a
friend about a post my wife made on Facebook.In response to the wild claims about “creating X number of jobs” by both
presidential candidates, she posted: “Entrepreneurs and innovators create jobs,
not presidents.”In response to her
post, my friend commented that FDR’s New Deal and Eisenhower’s highway jobs
programs created many jobs, which in turn benefited entrepreneurs and
innovators. After a little back and
forth between us, he then posted this:

“Anyway the American Society of Civil Engineers claim
America needs to invest between 1&2 trillion on infrastructure in the next
10 years just to replace the outdated roads, potable water, sanitary sewer,
electrical grid, etc., such investment would save and create many jobs and
better our society. As far as Japan I'm not sure but I'll guarantee that in the
90s money was not as cheap as today's historical rates at which the gov. can
borrow today. I pay no attention to any evidence provided by the Cato Inst.,
Heritage Foundation, Tea Party or any other think tank funded by the Koch
brothers and their agenda based opinions. Thom Hartmann has debated top
officers of the Cato Inst.several times about the theory of FDRs' policies and
lengthening the recovery of the first Republican Depression and clearly showed
their attempt to rewrite history. "

Here are my thoughts on the matter:

1.It should come as no surprise that a group like
the American Society of Civil Engineers claim we need to spend up to $2
trillion on infrastructure.Who would benefit
more from such a spending spree than the ASCE?I don’t want to call into doubt their objectivity, but I’m somewhat
skeptical about following the advice of a group that would richly benefit from
spending more tax money on roads.It
would be like Boeing saying America’s military needs 500 new aerial tankers.I suspect some rent-seeking here.

2.We have a process for repairing roads and
infrastructure already.If our
infrastructure is in tatters, why aren’t funding requests being submitted in
the regular process?I fail to see why $1
- 2 trillion in additional spending is immediately necessary.

3.The “Japan reference”.I mentioned Japan spent about $1 trillion on infrastructure
spending during the 1990s to alleviate their economic quagmire to no avail (Frank
& Bernanke, 2009, p. 325).My friend
suggests that current low interest rates, at least in part, are reason enough
to undertake additional spending.I’m
skeptical.Much of Japan’s spending was
later thought to be wasteful (i.e. building new roads that paralleled existing ones,
etc.)

4.My friend’s bias leads him to completely ignore
the likes of Cato and Heritage.Fine,
but do so at your own peril.Both of
these organizations are full of experts who regularly publish on matters such
as infrastructure spending, and ignoring their work doesn’t invalidate their
findings.I would encourage my friend to
resist his confirmation bias and read published works by other
organizations.Then, refute their
findings. Choosing to completely discount
entire think tanks because of their funding source doesn’t nullify their
findings.